What we endeavor to do.

23 Sept 2017

Dear Fellow Investor,

As mentioned in last week’s report many Singapore traders are in a state of paralysis driven by fear, bad news and uncertainty.

The STI index has been steadily correcting having fallen from 3350 to 3201 in the last 1 ½ months.

In my opinion this is a buying opportunity because bullish factors are slowly  diverging from the bearish view of the crowd.

OCBC accumulating at a major support

For example, OCBC which we have held for many of our clients for over  5 years on 22 August announced positive results led by their wealth management and insurance businesses.

Singapore's Oversea-Chinese Banking Corp. reported a nearly 14 percent rise in quarterly profit, largely led by sustained growth in its wealth management business and robust results from insurance operations.

Banking performance is a lead indicator of recovery. and OCBC is a premier Singapore  bank exposed to all major sectors of the economy including property, construction, logistics, telco, and consumer products  

Their share price has been steadily rising and the handsome dividends keep rolling in. DBS and UOB have also been performing well.

Some real world economic facts such as higher tourist arrivals, industrial production up 21 % in July, sea and air cargo volume increasing  support the recovery. Global economic recovery is helping Singapore’s neighbors such as Thailand, Indonesia and Malaysia. This indirectly benefits Singapore.

The wealth management business has been steadily growing in Singapore. The growth has been 8 % year on year while in Hong Kong the rate is 7 % while in Switzerland the growth is 3 %.   Money flow  to Singapore from China, US, Europe and Asia is an emerging trend due to Singapore’s AAA credit rating, stable currency and political stability.

This is the macro view but let’s look at the practical way to pick opportunities.

These are 4 guidelines from Joel Tillinghast a billionaire  UK fund manager and writer of Big Money Thinks Small.

1-          Does the stock have a high earnings yield- that is a low PE

2-          Does the company do something unique that will allow it to earn super profits on its growth opportunity ? Does it have a moat ?

3-          Is the company built to last or is at risk from competition, fads, obsolescence or excessive debt ?

4-          Are the companies finances stable and predictable into the extended future or are they cyclical, volatile and uncertain ?

Most companies fail the test so it takes effort and research to find these gems.

This is what we endeavor to do.

On  27 September  Dolly and I will be traveling to Osaka and Kyoto and returning on 5 October. If you have any queries you may email me   

For account queries you can call our customer service desk @  03 2783 0300

Invest well and grow your wealth

Bill

A castle in Japan with a moat. Our shares must have a moat. 

Bullish market for the next 12 months

16 Sept 2017-

Dear Fellow Investor,

My outlook for the next 12 months for the US markets is bullish.

Weekly Dow Jones up 470 points this week

The Dow Jones continues to make new highs and some of the bullish reasons include:

Trump’s willingness to compromise on social issues: 

This will get  liberal members of his own Republican party and the opposition Democrats to support tax cuts, raise  the debt ceiling and infrastructure spending.  

Corporate tax cuts will fund share buybacks and increased dividends. Buybacks increase earnings for existing shareholders.

Individual tax cuts will stimulate consumer spending which is good for business.

These are  the main bull points. So far since Trump was elected the Democrats and liberal Republicans have blocked him at almost every turn. They refused to repeal the Obama health care disaster and blocked/ obstructed many of his judicial/ cabinet  nominees .

The twin hurricane disasters forced the opposition’s hand to grant disaster relief.

Trump crossed the political aisle to forge an alliance with his political enemies to do the right thing. and release the disaster relief funds

I saw Trump on CNN in Florida directing the relief operation. He showed his focus and skills in construction and rebuilding.

Even the mainstream Trump hating media: CNN/ CNBC/
BBC/ Bloomberg could not find fault.

Florida and Texas are recovering much faster than expected and Trump’s approval ratings have jumped.

In my life I have never seen a US president with Trump’s building/ development skills. 

Most like the Clintons/ Obama/ Bush   were political  hacks, out of touch, corrupt, and self serving   

As the US markets represents about 60% of the world’s equity capital, this will benefit markets around the world including Hong Kong, China, Singapore and Malaysia.

I particularly like Singapore due to the extreme negative sentiment as well as, doom and gloom among the investment crowd. 

I read that  Singaporeans  are selling their shares out of fear of North Korea  starting a war.  This is absurd. It is bluster and hot air by Kim.  Russia/ China and the US will never let it happen. Bookmakers in London access the odds at 99.9 % there will be no war.

Extreme fear by the sheep is always a good buying opportunity especially when the odds favor you by 99.9 % of winning. 

Because of the negativity we can buy selected quality shares at a discount while enjoying healthy dividends.

The same is true for the KLSE especially selected quality mid cap shares trading at reasonable valuations.

Invest well and grow your wealth
Bill

One of my colleagues  at Phillip owns a similar cat. It is a rare leopard cat. She told me it is an expert rat catcher.

Value represents assets while growth represents ideas.

10 Sept 2017

Dear Fellow Investor,

A  tragic but ultimately   bullish event happened last week in Texas.  

This hardy Texas dog knows how to survive. without help. Hurricane Harvey destroyed over 100,000 homes and billions of dollars of infrastructure but  in the crises lies opportunity.  

Trump joined with the Democrat leadership (opposition party)  to raise the debt ceiling for 3 months to avoid a government shutdown and release over 10 billion in aid to the Hurricane Harvey victims. 

Even the liberal democrats, socialists and Trump haters could not refuse life saving aid in the face of misery and suffering. 

They put their ideology aside for the greater good.

This is evidence of Trump willing to meet with the opposition and compromise rather than taking a hard line stance.  

It could mean there will be progress in reducing taxes for individuals and corporations, providing funds for rebuilding infrastructure and building the Mexican border wall to keep out the drug dealers, criminals, terrorists and illegals  

Trump’s leadership and expertise in infrastructure and property development  his shined.

His response to Hurricane Harvey  and the debt ceiling has resulted in a jump in his approval ratings from the low 20’s to over 45 %.

This will boost stock markets world wide.  It will boost commodities and companies linked to building and development. Even gold and silver have caught a bid and awakening from a 5 year bear market.

Lets continue to focus on value stocks that offer growth. Value represents assets while growth represents ideas.   I like a combination of both.

Invest well and grow your wealth

Bill

Today’s ‘critter’ is the Patagonian mara…a relatively large rodent…and somewhat rabbit-like animal that is found in open and semi-open habitats in Argentina. The KLCC Aquaria has a similar animal.

Trip to Osaka

2 Sept 2017

Dear Fellow Investors

Some of our successful investments  in the KLSE over the years  have been Japanese, American  and Taiwanese companies  with Malaysian subsidiaries.

For example Japan Tobacco, Inari, Tasco and recently purchased Uchi Tech are some which we bought.

They are able to leverage on lower wages, lower  taxes  and less government regulations than they would suffer in their home, countries.

If they export which all do they  benefit from  exchange rate differences.

Because they must report to their home office, they  tend to be more prudently managed. Aji a  maker of MSG is an example.

On 27 September, Dolly and I will be taking the night flight  to Osaka.

 We will spend 4 days in Kyoto and 3 days in Osaka to view the historical attractions, including the world’s largest aquarium which has a giant whale shark.

I am planning a visit to Nidec in Kyoto,  which is  the world’s largest manufacturer of miniature electric motors.

I want to find out if they have a Malaysian or Singapore subsidiary. If they do that could be a good investment for us.  Subsidiaries tend to perform better than their mother company.

The KLSE/ SGX continue to consolidate with poor momentum.  Singaporeans/ Malaysians are  pessimistic and have reduced their spending and increased their savings.  

My bet is the sun will rise again- it always does. So I do not advise being pessimistic and leaving your money in a fixed deposit. Look for good value while the market is quiet.

Continue to focus on solid companies with earnings growth/ dividends  Rubber glove demand is picking up and that will benefit our holdings in Kossan. 

The floods that have hit Houston, Texas  have destroyed over 100,000 homes, power lines roads and schools  with an increased risk of disease among the thousands of homeless.

Trump will allocate money to buy more hospital supplies, construction materials and rubber gloves. Trump is taking a hands on approach to the disaster so progress will be made to help the victims  

Trump in my opinion has a good heart although he is a rough, rude and frank talker. He donated out of his own pocket 1 million USD to the flood victim's cause. The Clintons, Bush or Obama never opened up their wallets to disaster victims. All talk and sympathy but no money. Money talks.  

Our investment  in Kossan is steadily rising and should bear more fruit.

Invest well and grow your wealth
Bill.

Today’s critter is a Zoo Negara sun bear. It is fun to watch them climb
They are really fast despite their lazy appearance.

"One belt one road is an under appreciated unstoppable trend that will underpin Asian markets"

27 August 2017

Dear Fellow Investor,

China spent over 2 trillion USD on infrastructure last year while the US spent less than 1 trillion. 

Trump wishes to match China spending on infrastructure but the opposition party and even some in his own party  refuse to cooperate. It boils down to political paralysis.

As investors we must follow the macro trends and China development is one of these trends.

China is now calling the shots in Industrial metals pricing; Trading volumes on China's three exchanges reach record levels; Demand buoyed by China’s New Silk Rail Road Route connecting 16 cities in China with 15 cities in Europe; Aussie / Japan Yen Traders tracking Shanghai base metals; -

China is dominating the global resources game. When Iron ore futures on the Dalian Commodity Exchange (DCE) surged to a record high earlier this year, on expectations about Beijing's spending plans for building up the country’s transportation network, spot prices in Australia and New York jumped soon after.

This pattern demonstrates China's growing clout in setting the prices of commodities. Prices of the steel-making material have since come off their 52-week highs, but price gyrations underscore just how far China has come in pricing power on both the spot and in the futures market, particularly for heavily-traded mineral ores like aluminum and copper, which is regarded as a barometer of global economic health. 

“Over the last two years, the drivers of global metal price discovery have, in our view, shifted to China."
Gary Dorsch  Global Money Trends

Rail freight trains rarely generate main stream media attention. Yet the January 18th, 2017; arrival at DB Cargo’s London Eurohub terminal in Barking, east London, was slightly different. A freight train had travelled more than 7,500-miles to Britain from Yiwu in eastern China, and was the first-ever freight service to complete the journey. 

Taking 18-days to pass through eight countries, the train received a VIP welcome, with Chinese lion dancers and TV crews from around the world gathering to mark its arrival. Such strong interest is due to the potential of transEurasian rail freight to British logistics and forwarding companies. 

The journey took around half the time of a similar sea voyage, and cost approximately half of the equivalent air freight journey. “This moment was important to show that we can run the train in less than 18 days to the UK,” said InterRail Group, Switzerland, the operator of the service. It’s hopeful of adding more British services in the future. 

The service, carrying garments, bags and suitcases among other items, passed through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, France, and finally to London along China’s so-called “Belt-and-Road” initiative that was launched in 2013. The key trading route will greatly affect other companies that transport goods by sea and air. 

The first direct freight train to reach the United Kingdom from China, ended after a 16-day journey, which normally takes 45-days by sea. On January 2nd, London became the 15th city in Europe that was added to a train freight line.

How do we leverage on this trend ?  We can look at high quality  shipping and logistics  companies listed in Hong Kong/ Singapore and Malaysia  as well as    resource companies in Australia.
I am focusing on Asian stock markets for my clients as I believe they offer better value with less risk compared to developed markets  For example Hong Kong trades at a PE of 12.7 compared to  the S & P 500 PE  of 25

One belt one road is an under appreciated unstoppable trend that will underpin Asian markets.

Obviously we must be selective in how we allocate our capital  and in the following weeks I will be focusing on Asian market opportunities we can profit from based on this scenario.

Invest well and grow your wealth
Bill

Today’s critter is a Corgi. Her name is Pipito,  She is looking for a loving home. She has had her shots is neutered  and is very healthy and a good watch dog. Please whats ap/call me if interested.  012 685 1207

Valuable Insight by Motley Fool

19 August 2017

Dear Fellow Investor,

Last night I listened to a podcast from Singapore with Tom Gardner  co-founder and CEO of Motley Fool. For those who might not know, Motley Fool is an investment research service with a world wide presence. They provide members with fish but also teach how to fish.

He shared some valuable insight which can benefit all of us as investors.  He shared Warren Buffet’s advice to only buy companies with the ability to raise their prices.   Uchi Tech Bhd, maker of micro processors for coffee machines  is one as well as Well Call Bhd, a maker of custom hoses.  

Tom also likes businesses  run by their founders. Uchi, WellCall, Inari and ECS IT are examples. He said that statistically: owner operated business outperform by 2 % year on year on average compared to those run by CEOs/ managers  with no skin in the game.

We hold UchiTech, Inari, ECS IT and Well Call for  clients and ourselves.

He also believes we should learn and add to our winners. I believe in learning from our winners  but in my opinion adding to our winners when valuations are stretched is a dangerous strategy .

Tom mentioned the  trends which will benefit in the years to come.  They include robotics, artificial intelligence, medical diagnostics and automation. These sectors are where money is going. I am looking hard for opportunities in these sectors especially those companies who automate. The government announced they will raise worker levies but I do not forecast  a tax on robots

His last takeaway was to believe in entrepreneurs  rather  than most financial analysts. For me that means know the management, their vision and confirm that from our study of their financial statements. I trust analysts who visit the companies they recommend  Those who are arm chair analysts, I discount.

Motley Fool visits all the companies they recommend.

The KLSE is in a state of hibernation. Liquidity has dried up. Investors are pessimistic. There is a cloud of gloom and doom overhanging the market.

I remember an old saying. Never sell a quiet market. We buy strong well managed businesses which have held up well in this atmosphere.  We continue to collect our dividends and sleep at night .

Look at the bright side. S & P maintained the Malaysia financial rating at -A which is investment  grade. GDP is gone up to 5.4% The general election is coming.  and that will remove an uncertainty that may get foreigners back into the market. Steve Bannon, senior adviser to Trump was fired yesterday by Trump as Bannon wanted a trade war with China. Bannon was a good friend of Trump but with Trump business is first before friendship and China is good for business. Hence no trade war or war with North Korea.

Invest well and grow your wealth

Bill

Today’s ‘critter’ is a fossa…the largest mammalian carnivore on the island of Madagascar — and has been compared to a small cougar.  It is a member of the Eupleridae, a family of carnivorans closely related to the mongoose family.  Although the species is widely distributed, it is locally rare in all regions, making fossas particularly vulnerable to extinction. Photo Credit: Ran Kirlian.

Panic selling by the uniformed

13 Aug 2017

Dear Fellow Investor,

Damage on world markets  last week was over USD 1 trillion . The catalyst for panic selling was North Korea’s threat to launch a missile  attack on Guam, a US possession and navy base.  This is a low probability event based on the below report:

Scenes like this scare people and cause panic selling by the uniformed. We are bombarded by the media 24/7  and this intensifies the fear. Kim is a bully and will ultimately back down in the face of overwhelming China and US power.

In a Chinese state-run newspaper on Friday Beijing made it clear “If the US and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so.” Beijing’s preferred outcome is a continuation of the status quo, warning Kim Jong Un that it would “remain neutral if North Korea were to strike first.”

China has the military and economic power to back up their policy.  Trump knows this as well as North Korea.   North Korea knows China will remain neutral should Kim attack Guam. Without China, North Korea has no economic  or military support  .  

North Korea will threaten but take no action and markets will recover.  Trump being a businessman does not want war that involves South Korea as  they control multiple world wide supply chains for electronics and high tech industries  An attack on Seoul could put the interconnected business world into a world wide depression and Trump would lose in the next election.  

Just like Kim Jon Un, Trump’s main focus is to keep power for himself and his cronies.

August, historically is the worst month for the stock market  however; our value investing strategy in managing your cash and EPF accounts has protected us during these uncertain times.

Year to date we have earned a net return of over 10 % for our managed accounts. We run our winners and are mindful of the companies we hold.

For example some of our losses in the last 5 years were in Amway which cut their dividends and had large Forex losses. We sold LeFarge cement due to an oversupply of cement, dividend cut and receivable payment problems  We cut our BAT position due  dividend cuts and rises in excise taxes to a level which makes their cigarettes too expensive for the average Joe smoker.

We also sold our Tune Insurance positions due to  Tony Fernandez selling large portions of his Tune shares. I was always wary of Tony because of his public boasting and high media profile. However;   we hold  insurance companies such as LPI and Allianz which keep a low profile and have super solid balance sheets. 

We also cut our position in Delium which although solid financially was exposed to oil which is still in a downtrend. .  Lastly we cut our Hovid position when they did not get FDA approval for Tokovid, a heart protection product and also production problems and MOH suspension due to miss labeling .  Their balance sheet was also deteriorating. 

Our losses were relatively small  compared to our winners but we take calculated risks to put the odds in our favour and that is why we earn reasonable returns over time. And sometimes take losses

Our winners speak for themselves so I won’t mention them.

I am positive moving forward but there will be volatility.

S&P 500 has made it at least a year without so much as a -5% pullback, and marks the longest streak since 1995. In the background, global economic growth is strengthening, central banks continue to be accommodative and despite this week’s earnings disappointments, S&P-500 profits are on course for the back-to-back +10% growth.

Invest well and grow your wealth

Bill

Today’s critter is “out of Africa” as well.  It’s the klipspringer, a tiny antelope found in eastern ad s

Southern Africa — and it’s just too cute for words.  I saw several when I was in Rhodesia/Zimbabwe back in the early 1970s.  They stand 17/24 inches/43-60 cm tall at the shoulder.   The name “klipspringer” is a compound of the Afrikaans words klip (“rock”) and springer (“leaper")